- Green Street’s price index fell 0.1% in September on a 4.7% student housing drop, leaving values up 4.7% over the year but 12.8% below the 2022 peak.
- Malls rose 15% over 12 months and strip centers returned to peak, while office remains 33% below its high and apartments are 4% lower year over year.
- Green Street expects prices to fall if higher yields stick, with solid-fundamentals sectors holding up better than slow-growth ones, though it has not sized the decline.
Commercial real estate’s price recovery stalled in September, according to Green Street, which warns that a sustained rise in yields could push values lower.
The firm’s Commercial Property Price Index slipped 0.1% in the month and is up 4.7% over the past year. GlobeSt’s breakdown of the full report puts values 12.8% below their 2022 peak.
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Student Housing Drives the Decline
The September dip was narrow, per GlobeSt’s breakdown. Student housing fell 4.7%, while every other individual sector in the report posted no monthly change, and the core-sector index covering apartments, industrial, office and retail held steady.
Student housing carries a 2.5% weight in the all-property measure, which limited its effect on the headline number. The sector is now 5% below its year-earlier level and 11% below its 2022 peak. The report does not explain the cause of the adjustment.
Retail Leads the Recovery
Mall values rose 15% over the past 12 months, the biggest annual gain of any sector, and stand 6% above their 2022 peak. Strip retail gained 8% and returned to its peak level. Neither changed in September.
Retail makes up 20% of the all-property measure, split evenly between malls and strip centers, so those gains carry real weight. Retailers are a bright spot even as the top-tier mall recovery masks distress in weaker centers.
Office and Apartments Still Lag
Office values rose 5% over the year and were flat in September, yet remain 33% below their 2022 peak, the largest remaining gap of any sector in the report. Apartments are down 4% from a year ago and 22% below peak, making them one of only two sectors with a negative annual comparison.
Health care shows how similar growth rates can mask different positions. It also gained 5% over the year but sits just 8% below its peak. Self-storage rose 5% and remains 21% below peak, and net lease rose 1% and is 18% below.
Other Sectors Hold Gains
Industrial values increased 7% over the year and are 8% below their 2022 peak. Data centers, lodging and manufactured home parks each gained 6%, with values still 6%, 5% and 7% below their respective highs.
An annual gain does not mean the earlier loss has been erased. Retail has regained its 2022 pricing, while industrial and several other sectors have only partly recovered.
Income Growth Faces the Test
The next test is whether property income can support values if yields stay elevated. Green Street’s index comes from valuation models that depend mainly on market cap rates and net operating income growth.
That is why Rothemund’s warning centers on future fundamentals, not past price gains. The report shows where values stand today but does not rank which sectors will grow income fastest.
Nor does recent appreciation show which sectors will best withstand another rise in yields. Retail has regained or topped its 2022 pricing, while industrial and several other sectors have made progress without fully recovering.
Why It Matters
“If this rise in yields sticks, property prices are likely to go down,” said Peter Rothemund, co-head of strategic research at Green Street. He added that the question investors are asking now is how much.
The split matters for underwriting: a 5% annual gain in office still leaves a 33% hole, so annual momentum alone is a weak guide to value. Brokers are already seeing it, as buyers demand price cuts on deals in the market. Sectors with the largest unresolved losses, including office, apartments, self-storage and net lease, have the least cushion.
What’s Next
Green Street has not quantified how far prices could fall if yields keep rising. Rothemund said pricing for sectors with solid fundamentals should hold up better than pricing in sectors with limited growth.
Watch whether income growth can support values in the sectors still furthest from their peaks, and whether student housing’s September drop spreads to other segments.
